Dueling Budget Deficits

The Congressional Budget Office said it projects this year’s deficit will be significantly lower than the White House’s forecast because CBO expects higher revenue collections and lower government spending.

The congressional office on Friday forecast a $371 billion shortfall for the fiscal year that ends Sept. 30, compared with the administration’s $423 billion — a $52 billion gap. Late Monday, in its latest monthly budget review, the CBO explained that its projected spending for defense, Medicare and its new prescription drug benefit, Medicaid, student loans and unemployment compensation is $33 billion less than President Bush’s Office of Management and Budget projects. Its forecast revenues are $19 billion higher than the White House’s figure, CBO said, mainly due to expectations for corporate income taxes.

For the third year, the administration has calculated that the annual deficit will come in higher than most public and private forecasters expect. Administration officials said they just want to be conservative. Observers in both parties say the White House projects a high deficit because, when the actual result turns out to be less, the administration can claim credit for stemming the red ink. For fiscal 2005, the administration projected a $427 billion deficit; it ended up at $318 billion. By comparison, CBO at this time a year ago projected the 2005 deficit would be $394 billion — $33 billion less than the White House. The final figure proved both were too high, as the year’s revenues came in more robustly than anyone expected partly due to the economy’s recovery. –Jackie Calmes

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